Fed’s clock ticking on Bank of Whitman

A “prompt corrective action” for the Bank of Whitman was ordered last week by the Board of Governors of the Federal Reserve system. The order found the bank failed to submit an acceptable capital restoration plan after a board finding last Sept. 30.

The Federal Reserve announced the corrective action in a release dated Tuesday.

The directive last Thursday followed a Feb. 3 meeting when the bank’s board of directors appointed Bill Knox, Chief Financial Officer, to negotiate on behalf of the bank with the Federal Reserve. That followed the resignation Jan. 14 of the bank’s two top officers, Jim Tribbett, CEO, and Craig Conklin, Chief Lending Officer.

“This is really just a formalization of what we need to do,” Knox said Wednesday. “But the bottom line is we need to raise capital.”

Both the Federal Reserve and the state Department of Financial Institutions ordered the Bank of Whitman last summer to pump up its capital.

The directive gives the bank no more than 90 days from the Feb. 9 date to increase its equity through the sale of shares or capital from outside sources.

Knox said the bank has been pursuing several strategies to bring in more capital. Those have not yet been finalized, however, which prompted the Federal Reserve’s order.

“That’s the language they use. And they use very strong language,” said Knox. “But also in the action, you’ll notice, they mention they can give us extensions if they choose.”

The bank can enter into and close a contract to be acquired by a depository institution holding company or combine with another depository institution with necessary regulatory approvals.

Among the Bank of Whitman’s strategies are plans to sell the bank’s stock and possibly to merge with a larger institution or to find outside investors.

Knox pointed out Sterling Savings and AmericanWest banks were both under corrective action from the Federal Reserve in the past two years. Both rounded up outside investors to pump up more capital, though their names did not change.

Knox said the bank’s stock is privately held. It has no set price. Bank of Whitman stock is only worth the price that can be negotiated between the buyer and the seller.

The directive also prohibits the bank from making capital distribution, including payment of dividends.

Another segment prohibits the bank from soliciting or accepting new accounts or renewing time deposits without written approval from the Federal Reserve Bank of San Francisco.

The bank is also barred from selling or transferring assets.